Users urged to get it right on Z clauses

A new campaign has been launched to reduce the incorrect use of Z clauses in NEC contracts.

The clauses can be inserted into NEC contracts so that parties can agree additional conditions, in order to meet specific needs relating to the project and the terms of its delivery.

But NEC has warned that the incorrect use of Z clauses could undermine the effectiveness of the contracts.

Rekha Thawrani, general manager for NEC, said: “The biggest problem with the misuse of Z clauses is that when they’re used incorrectly, they change the risk profile of a contract.

“The issue all users can face is that if a Z clause is wrongly inserted, it can make the contract ambiguous. As a result, good project management can be hampered and the project is likely to cost more, or take longer to complete.

“NEC contracts have a balanced risk allocation to tailor to almost any circumstance, which means that if you don’t like the balance, then both parties should reconsider the contract you’re using, before adding clauses.

“If an additional clause does need to be inserted then the client should ensure that it complements the existing contract terms, avoids duplication and what’s more is flexible, clear and stimulates good project management.

“Clauses should only be inserted if they define what is required and should be drafted by someone with experience of NEC, who understands how the clauses will affect the rest of the contract.”

Adam Davis, construction and engineering law specialist at Palmers, said: “All too often, clients are being caught out by restrictive and/or onerous Z clauses that change the entire meaning of the NEC contract. 

Parties considering entering into NEC contracts need to read all Z clauses with great care because it has become a convenient way for principal contractors to add in clauses that are not favourable to sub-contractors.”

At Palmers, we can advise on any changes to NEC, JCT or standard form contracts and assist in the drafting of bespoke contracts and advice and other commercial agreements, such as collateral warranties and guarantees. For more information, please contact Adam Davis.